Prosecutors investigating interstate trafficking in allegedly obscene materials were set back yesterday when a federal appeals court in Richmond disallowed subpoenas an Alexandria federal grand jury had issued to two distributors of sexually explicit materials.

The opinion, saying the requests were overbroad and burdensome, was delivered by a three-judge panel of the 4th U.S. Circuit Court of Appeals and reversed a ruling in October by U.S. District Court Judge Claude M. Hilton upholding the subpoenas to Model Magazine Distributors Inc. of New York and Metro Video Distributors Inc. of New Jersey.

Hilton's ruling, the appeals judges wrote, had overlooked the subpoenas' breadth and the fact that they were directed to materials "presumptively protected under the First Amendment," which guarantees free speech.

Saying the government appeared engaged "in a paradigmatic 'fishing expedition,' " the judges said the subpoenas would require the distributors to spend "countless hours" viewing their inventories to determine which tapes contain the broad categories of sexual activities defined by prosecutors.

"We find such a strategy to be 'unreasonable and oppressive,' " the judges wrote. They said it would have been much less drastic for prosecutors to buy tapes and issue a subpoena for particular tapes that were determined to be obscene by the grand jury or a magistrate.

Judges Sam J. Ervin III, J. Dickson Phillips, Jr. and J. Harvie Wilkinson III were the three members of the panel.

The Alexandria investigation, which was initiated by local authorities, was taken up by the Justice Department as part of U.S. Attorney Edwin Meese III's promise to combat "an explosion of obscenity" nationwide.

The appeals panel also overturned contempt citations by Hilton against the two distributors, which had called for a paying $1,000-a-day fines. Hilton had stayed imposition of the fines while Model and Metro appealed his ruling.

The decision "comes as no great shock," said Metro Video's attorney, John K. Zwerling in Alexandria. "It was clearly an improper use of a subpoena."

The grand jury requests, he said, were "an attempt to get a legitimate outlet of videotapes to go through its inventory, watch its films and determine if any were obscene and then turn them over to the grand jury rather than the grand jury ordering what, in its opinion, was obscene."

"That's fantastic . . . . It's really a remarkable decision," commented Model's attorney Herald P. Fahringer of New York. "This is not the first time prosecutors have tried to do with subpoenas what they could not do with search warrants."

Assistant U.S. Attorney Lawrence J. Leiser, who is directing the grand jury investigation, could not be reached for comment.

Yesterday's ruling does not appear to affect one indictment already handed up as a result of the grand jury's investigation.

In the first case of its kind, three Fairfax County residents and a Maryland corporation, Educational Books Inc., were charged with racketeering and interstate distribution of obscene materials for allegedly selling obscene materials through a chain of adult book and video shops in the Washington area. That case is set to go to trial next month.

As part of its investigation, which began a year ago, the grand jury issued the subpoenas to Model and Metro Video. In addition to videotapes, the subpoenas requested "It was clearly an improper use of a subpoena."

-- John K. Zwerling

business records showing a relationship between them and 10 local corporations, including Educational Books.

Arguing for enforcing the subpoena, Leiser had said the government was like any other of Model's customers. "The grand jury has placed an order . . . . We assume that if one of {Model's} bigger clients asked for one copy of 'everything you've got,' it would be filled in short order."

The appeals judges said they were "also troubled by the vagueness of the subpoenas' requirement to turn over tapes that have "lewd or lascivious displays" of the body. This "asks a vendor to determine what judges have had great difficulty determining," they wrote.